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FFI Special report: Bond markets floating on central bank liquidity attract risk-averse investors to fixed income funds

Fund Flow Index - September 2020

Inflows to fixed income funds were almost equal to all other fund categories combined in August. Net inflows to bond funds were £454m out of the total across all fund categories of £920m. This was the fifth month in a row that has seen bond-fund inflows well above the long run average, generating an FFI: Bonds of 55.9, well above the neutral 50 mark where the value of buy orders equals sells.

Key highlights from this month's FFI:

  • Fixed income funds saw inflows equal to all other asset types combined in August as investors shun riskier assets
  • Equity funds saw only a £74m trickle of inflows driven by the first buying of European funds in two years, index funds and global funds (driven by the ESG category)
  • UK equity funds and income funds continued to suffer big outflows
  • August trading volumes were lower than usual for the summer lull as asset markets of all kinds were calmer than they have been all year